I inherited my mother’s IRA and I’m required to begin taking required minimum distributions (RMDs) this year. Can I have the withdrawals transferred to a charity and not report them as income?
Taxpayers are allowed to donate up to $100,000 ($200,000 for a couple) of RMDs to charity in any year. These are Qualified Charitable Deductions (QCD) but certain rules do apply.
- While the amount of the QCD is not considered taxable income, the payments to charity are not deductible contributions.
- The transfer must be made directly from the IRA to the charity before the RMD deadline for the year (usually December 31).
- You must be 70 ½ or older.
- The charity must be a qualified charity. QCDs are not allowed to Donor Advised Funds, Private Foundations, split interest charitable trusts, or supporting organizations.
So, if you are 70 ½ or older and your charity qualifies, you can use your IRA RMD for a QCD!
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You all met Maureen Wild earlier this year when she wrote about the Capaldi Reynolds & Pelosi Team’s support of the American Heart Association and her personal connection to that cause. This month she has made us aware of the Robert Wood Johnson campaign, Christmas in July, to bring toys and games to young cancer patients. CRP is on board with that effort.
Maureen has been part of our Team for 29 years. Her day job is managing our financial statement and audit quality review process, but around the holidays she finds us a worthy family to adopt and leads the effort to shop for, wrap, and deliver gifts and food for their celebration. Come February she has us sending Valentines to the troops.
Maureen has one son and two grandchildren whom she adores. She teaches Sunday school and is active in collecting clothing that will be sold to fund animal rescue and the treatment of animals in shelters. She enjoys reading, day trips, and playing chicken foot for hours. You might even find her at a yard or estate sale. She is one busy lady with a very big heart.
If you give someone money or property during your lifetime, you may be subject to federal gift tax. The federal gift tax exists for one reason: to prevent taxpayers from avoiding the federal estate tax by giving away their money before they die. When it comes into play, the tax is owed by the gift giver and not by the recipient. You probably have never paid it and probably will never have to.
While there may be a lot of wisdom in the proverb “May your charity increase as much as your wealth,” there can also be wealth in properly planning your charitable giving. This wealth is derived from the economic benefit that can result from tax savings achieved by implementing certain charitable giving strategies.
Bunching of deductions is one such charitable contribution strategy. Because the Tax Cuts & Jobs Act limits many allowable itemized deductions beginning in 2018 and increases the standard deduction, many taxpayers will find that the standard deduction is more beneficial than itemizing, thus losing the tax benefit of making the gift.